Comptroller Stringer Audit Finds City Gave Out $59.2 Million In Senior Citizen Tax Breaks To Deceased New Yorkers And Corporations

(New York, NY) – A new audit released today by New York City Comptroller Scott M. Stringer found that between FY 2011 and FY 2017, New York City failed to collect $59.2 million in tax revenue because the Department of Finance improperly credited a tax exemption intended for seniors to thousands of deceased individuals and corporations. The agency’s failure continued unabated for years because it did not follow state tax law which requires that any senior homeowner who has been granted this exemption re-apply for the credit every two years.

“Our audit uncovered that the Department of Finance has been giving away tens of millions in tax exemptions meant for senior citizens to corporations and deceased New Yorkers,” Comptroller Stringer said. “This lost revenue could have gone toward building the affordable housing we desperately need, or increasing resources for our school children. Programs like the Senior Citizen Homeowners’ Exemption help older New Yorkers to stay in their homes and remain in their communities. The City must ensure these tax breaks only go to those who deserve them.”

The audit examined whether the Department of Finance (DOF) ensured that property owners receiving the Senior Citizen Homeowners’ Exemption (SCHE) as of July 1, 2015, met the eligibility requirements of the program. SCHE provides a partial property tax exemption for any senior citizen who owns a one, two, or three-family house, condominium, or co-op apartment in New York City. To be eligible, an applicant must be 65 or older, have a combined household income below $37,400, and occupy the property as their primary residence. SCHE can reduce the assessed value of a property by between 5% and 50%, based on the income of the homeowner.

In New York State, an individual who qualifies for the SCHE automatically qualifies for the Enhanced School Tax Relief (STAR) Exemption, which is also available to the same population but with a higher income cap, $79,050 a year. The Enhanced STAR Program exempts the first $62,200 of the full value of the home from school taxes.

When recipients of the SCHE pass away or sell their homes, their tax exemptions do not transfer to the next owners. To ensure that only the proper individual receives the tax credit, DOF is required by state law to make all recipients of the exemption re-apply every two years. However, the Comptroller’s audit uncovered that the agency has failed to request those re-applications for the last ten years. As a result, thousands of unqualified individuals and corporations continued to receive the tax break, costing the City millions in potential tax revenue.

In total, from FY 2011 to FY 2017, the Department of Finance improperly credited $59.2 million in tax breaks to 3,890 ineligible properties

• 3,246 properties received 17,354 exemptions after the homeowner had died, resulting in a loss of at least $35,976,029 in tax revenue from FY 2012 through FY 2017.
• These same properties were also incorrectly credited with an Enhanced STAR exemption after the homeowner’s death, which added up to another $10,460,540 in lost revenue.
• 71 properties that were owned by corporations received 307 exemptions for which they were not eligible, totaling a loss of at least $1,377,622 from FY 2011 through FY 2016.
• 573 properties that contained four or more units had the SCHE applied to all units in their buildings, instead of only the one that qualified. As a result, the City lost out on at least $11,176,036 in tax revenue from FY 2011 through FY 2016.

The audit made several recommendations, including that DOF identify any deceased homeowners who applied for the SCHE and remove this and the Enhanced STAR exemption from those properties, retroactive from the date of death. The audit also recommended that the agency take steps to recover any and all erroneous tax exemptions that were applied to ineligible homeowners.

The Department of Finance agreed with all of the audit’s recommendations and said it will recoup ineligible benefits from corporations and examine recouping benefits improperly received by unqualified individuals.

In six audits of the Department of Finance since January 2014, Comptroller Stringer’s office has identified close to $75 million in total lost revenue. Past audits of DOF include:

• March 2014: DOF improperly classified the tax and building classes of 308 vacant properties throughout New York City, resulting in an annual real estate tax loss conservatively estimated at $1.7 million.
• June 2015: DOF allowed owners of at least 1,500 properties to receive STAR or ESTAR exemptions for which they were not eligible. Specifically, DOF failed to remove exemptions for at least 1,355 properties when ownership was transferred to a corporation or a limited liability company, potentially causing the City to miss out on $422,520 in property tax revenue during FY 2015. In addition, 154 properties that were not classified by DOF for residential use incorrectly received the exemptions.
• January 2016: Corporate-owned condos and other properties such as indoor parking spaces and gardens were granted more than $10 million in improper tax abatements over the past 4 years because DOF failed to conduct basic document checks.
• February 2016: New York City will miss out on $2.09 million of potential tax revenue if DOF does not correctly classify nearly 200 buildings in Brooklyn as residential when they are actually being used for commercial purposes.
• June 2016: Nearly 100 mixed-use buildings in Queens were improperly assessed by DOF and taxed at an incorrect, lower rate. As a result of the audit, New York City will bring in up to$1.28 million in additional revenue over the next five years.

“New Yorkers work hard for their money, and they deserve a tax system that’s transparent and equitable. Instead, these audits have made clear that the Department of Finance is not playing by the rules and it’s taxpayers who have paid the price. The City has an obligation to correct this mess ahead of the next tax season so that every New Yorker gets their fair shot,” Stringer said.

To read the full audit report, click here.

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